Publisher: Asian Economic and Social Society

The Effects of Cost Leadership Strategy and Product Differentiation Strategy

on the Performance of Firms

Hashem Valipour (Assistant Professor, Department of Accounting, Firouzabad

Branch, Islamic Azad University, Firouzabad, Fars, Iran)

Hamid Birjandi (Department of Accounting, Marvdasht Branch, Islamic Azad

University, Marvdasht, Fars, Iran)

Samira Honarbakhsh (Department of Accounting, zarin dasht Branch, Islamic

Azad University, zarin dasht, Fars, Iran)

Citation: Hashem Valipour, Hamid Birjandi and Samira Honarbakhsh (2012) “The Effects of Cost Leadership
Strategy and Product Differentiation Strategy on the Performance of Firms”, Journal of Asian Business Strategy,
Vol. 2, No.1, pp. 14-23.
Journal of Asian Business Strategy, Vol. 2(1), pp. 14-23

The Effects of Cost Leadership Strategy and Product

Differentiation Strategy on the Performance of Firms

Abstract

This study empirically investigates the effects of business strategies on the

Author(s)
Hashem Valipour
Assistant Professor, Department of Accounting,
Firouzabad Branch, Islamic Azad University,
Firouzabad, Fars, Iran.
Email: h.valipour@gmail.com
Hamid Birjandi
Department of Accounting, Marvdasht Branch,
Islamic Azad University, Marvdasht, Fars, Iran.
Email: h.birjandi63@gmail.com
relationship between financial leverage and the performance of firms. The
research data is collected from 45 firms in the Tehran Security Exchange (TSE)
during 2003-2010.The statistical technique is used to examine the assumption of
multiple regressions. To test the assumptions, firms were divided into 2 groups:
firms with cost leadership strategy and firms with product differentiation strategy.
The results indicated that in the firms with cost leadership strategy, there were
positive relationships between leverage; cost leadership strategy and dividend
payout with performance. The results also suggested that there were positive
relationships between leverage and firm's size with performance in the firms with
product differentiation strategy, but the relation between product differentiation
strategy and dividend payout with performance was negative.

Samira Honarbakhsh
Department of Accounting, zarin dasht Branch,
Islamic Azad University, zarin dasht, Fars, Iran.
Email: honarbakhsh_88@yahoo.com

Key words: Cost leadership Strategy, product differentiation strategy, financial leverage, performance

Introduction

The purpose of joint stock companies and their managers is
maximizing the value of equity and on the other hand it is
maximizing the value of the company and its stock. The
maximizing of the company's value is required to use the
financial resources and optimal strategy by managers and
their correct performances. The first time capital structure
and its optimal composition were issued by Modigliani and
Miller (1958) and it was used in the more financial research
and this research also resulted in new theories.
Nevertheless, previous studies that tried to solve the
leverage–performance puzzle continued to report mixed and
often contradictory findings (Ghosh, 1992; Harris and
Raviv, 1991, Jermias, 2008). However, O‟Brien (2003)
argued that the effect of financial leverage on performance
may be contingent upon competitive intensity and the
strategy pursued by the firm and researchers noted the need
for studies that examine the influence of these variables
(Jermias, 2008).

Ever since Modigliani and Miller (1958) proposed that
capital structure is irrelevant in determining firm's value, and
the theory of capital structure has been studied extensively.
According to this „„irrelevance proposition‟‟, a firm cannot
change the total value of its securities just by splitting its
cash flows into different streams because the firm‟s value is
determined by its real assets, not by the securities it issues
(Jermias, 2008).
Jensen and Meckling (1976) opposed this idea and argued
that the amount of leverage in a firm‟s capital structure
affects the choice of operational activities by managers and
these activities will affect company performance.
Results show that other factors besides capital structure also
influence company‟s performance, and the intensity of
competition and the strategy chosen by the companies will
affect these factors. Strategies often include both product
differentiation strategy and the cost leadership strategy
(Porter, 1996).
The findings contradict with equity accounting theory and
the theory of irrelevance of capital structure issued by
Modigliani and Miller (1958), but they support financial
decisions, intense competition and the strategy chosen by
the company‟s managements that affect company‟s
performance (Jensen, 1986; Harris, 1994 Jermias, 2008).

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Journal of Asian Business Strategy, Vol. 2(1), pp. 14-23
Two empirical studies by Barton and Gordon (1988) and
O‟Brien (2003) found that business strategy and financial
leverage interact significantly to affect firm's performance.
Thus, there is some empirical evidences that support the
argument that a firm‟s choice of business strategy may affect
the relationship between financial leverage and performance
(Jermias, 2008).
The purpose of this study is to investigate the effects of
business strategies on the relationship between financial
leverage and company‟s performance in companies accepted
at Tehran Stock Exchange.
Literature Review
 Cost leadership strategy
Porter's Strategies
The purpose of this strategy is the company's low-cost
products offers in an industry. Cost leadership strategy takes
place through experience, investment in production facilities,
conservation and careful monitoring on the total operating
costs (through programs such as reducing the size and
quality management).
The existing literature contains some discussions of why the
relationship between leverage and performance depends on a
firm‟s choice of strategy. Firms pursuing a strategy of cost
leadership will benefit more from the use of leverage in
terms of the increased managerial efficiency which
corresponds to be monitored by lenders. According to Jensen
(1986), monitoring by lenders also limits managers‟
opportunistic behaviors by reducing the resources available
for discretionary spending. Hence, Jensen (1986) proposed
that the control function of debt is more important for
companies that strive to be efficient (Jermias, 2008).
Accordingly, Porter (1985) suggested that cost leadership
firms need to control costs tightly, refrain from incurring too
many expenses from innovation or marketing, and cut prices
when selling their products.
 Product differentiation strategy
This strategy requires the development of goods or unique
services from unmatched by relying on customer loyalty to
the brand. A company can be offered higher quality,
performance or unique features that each of them can justify
the higher prices.
Miller (1987) argued that product differentiation firms tend
to invest heavily in research and development activities in
order to increase their innovative capability and enhance
their ability to keep up with their competitors‟ innovations
(Jermias, 2008).
The constraints of increased debt and requirements to satisfy
debt covenants will likely impede managers‟ creativity and
innovation, qualities which are critical to maintain
competitive advantage for product differentiation firms
(Balakrishnan and Fox, 1993; Simerly and Li, 2000; Jermias,
2008).
Biggadike (1979) argued that product differentiation firms
face high uncertainty, as their strong emphasis on innovation
requires them to engage in more risky activities and bet on
products that have not yet crystallized. This might make it
both difficult and undesirable for firms to use a greater
amount of debt (Jermias, 2008).
 Business strategies, financial leverage and
performance
Several studies on financial leverage and performance are
done, for example:
Dimitro and Jan (2005) evaluated the effect of financial
leverage on return of stock. Their results showed there was a
negative relationship between debt to equity ratio and return
of stock.
Ahn et al. (2006) investigated the relationship between
investment patterns and financial leverage. They showed that
companies with diversified investments have higher financial
leverage rather than focused investment firms.
Hou and Robinson (2006) investigated the effects of
concentration and industry average on the stock return. After
that control factors such as size and ratio of book value to
market, they found that firms in the competitive industries
took higher return of stock and had a higher leverage.
The inconsistent findings of prior studies on the relationship
between financial leverage and performance may be due, in
part, to the researchers‟ approach. Most of the researchers
who conducted these studies used the universal approach,
which examines the direct or main effects of financial
leverage on performance. O‟Brien (2003) notes that these
prior studies overlooked the effects of a firm‟s business
strategy and contends that this may account for their
contradictory results (Jermias, 2008).
Porter (1985) developed a framework that outlines how firms
might choose a business strategy in order to compete
effectively. He argued that a firm must choose between
competing as the lowest-cost producer in its industry (i.e., a
cost leadership strategy) or competing by providing unique
products in terms of quality, physical characteristics, or
product related services (i.e., a product differentiation
strategy). In addition, he emphasized that the essence of a
firm‟s business strategy is its ability to deliberately choose a
set of activities which will deliver a unique mix of values to
its customers (Porter, 1996; Jermias, 2008).
The two empirical studies by Barton and Gordon (1988) and
O‟Brien (2003) shed important light on the impact of
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 Journal of Asian Business Strategy, Vol. 2(1), pp. 14-23
business strategy on the relationship between leverage and
performance.
Jermias (2008) investigated "Relative intensity of business
competition and business strategy on the relationship
between financial leverage and corporate performance". He
concluded that there was a negative relationship between
financial leverage and performance; this relation was more
negative when product differentiation strategies were chosen
rather than cost leadership strategy
Research Hypotheses
Considering that the basic aim of this study is to analysis the
influence of cost leadership and product differentiation
strategies on relation between financial leverage and
company performance, the research hypotheses are classified
in two groups as follow:
The first group of hypotheses: The companies that used
the cost leadership strategy.
H1: There is a significant relationship between cost
leadership strategy and company‟s performance.
H2: There is a significant relationship between financial
leverage and company‟s performance.
H3: There is a significant relationship between company‟s
size and company‟s performance.
H4: There is a significant relationship between dividend
payout and company‟s performance.
The second group of hypotheses: the companies that used
the product differentiation strategy.
H1: There is a significant relationship between product
differentiation strategy and company‟s performance.
H2: There is a significant relationship between financial
leverage and company‟s performance.
H3: There is a significant relationship between company‟s
size and company‟s performance.
H4: There is a significant relationship between dividend
payout and company‟s performance.
Variables Definitions

Dependent variable:
Company’s performance: Two criteria are used to
assess a company‟s performance:
1 - The Accounting basis
2 - The Market basis
While accounting-based performance measures such as
return on equity (ROE) and return on investment (ROI) tend
to be more controllable by managers, they can be
manipulated more easily than market-based measures.
Furthermore, accounting-based measures tend to
underestimate the performance of firms that makes heavy
investments in the current period (such as innovators) which
are expected to accrue benefits in future. In contrast, market-
based performance measures such as the market value of
equities tend to be more objective and beyond managers‟
control (Merchant and Van der Stede, 2007, Jermias, 2008).
Therefore, this study uses market-to-book ratio to measure
firm performance. The main advantage of this proxy for
performance is that it incorporates future expectations of
firm's performance. Market-to-book ratio was calculated by
dividing the market value of the firm (year end share price
multiplied with the number of common shares outstanding)
by the book value of total assets (Jermias, 2008).

Independent variables
Business strategies: Classification of strategies is
based on the Porter‟s strategies (1985). Thus strategies are
categorized into two groups: cost leadership strategy and
product differentiation strategy that calculated as follows:
Cost leadership strategy: The ratio of total sales to total
assets.
Strategy of product differentiation: the proportion of

research and development reserve to total sales.
Financial leverage: The financial leverage measure
for each firm is based on the book value of debt and assets.
While the theory of capital structure suggests that financial
leverage should be measured in market value terms, most
empirical works tend to use book value rather than market
value, mainly because book values are more objective. In
addition, a survey by Stonehill et al. (1974) showed that
those financial managers tend to think in terms of book-
value rather than market-value ratios when discussing
financial leverage (Jermias, 2008).
Financial leverage is defined as the ratio of total debt in this
study (current liabilities+ long-term liabilities+ other
liabilities) to total book value of assets.

Control variables:
Firm’s size: Size is a control variable that measures
the size of the firm (Kouki and Guizani, 2009). Firm's size
variable has become a key variable in prior. Firms can be
categorized according to their size (measured by market
capitalization, total sales or total assets) for the purpose of
statistical analyses (Al-Najjar and Hussainey, 2009). For the

present paper, we use total assets as a proxy for the firm size.
Dividend pay- out: Dividend payout is a major
corporate decision that managers have to make. (Al-Najjar
and Hussainey, 2009). A large number of studies have
examined the extent to which dividends provide value
relevant information for investors to predict firms‟ future
performance (Hanlon et al., 2007). In this study dividend
payout calculated from total dividend distributed dividends
to the number of outstanding equity.
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Journal of Asian Business Strategy, Vol. 2(1), pp. 14-23

These Variables are summarized in the table (I).

Table 1. Description of the variables

Variables Proxies Calculations

PERFORM Performance Market to book value of equity.

Cost leadership Strategy: ratio of total sales to total assets
STRA business strategies Product differentiation strategy: the proportion of research and
development reserve to total sales.
Ratio of total debt (current liabilities+ long-term liabilities+ other
LEV financial leverage
liabilities) to total book value of assets.
SIZE Size of the firm A logarithmic function of total assets
DIV Dividend per share Total dividend distributed / the number of outstanding equity

Methods of Data Analysis Data Analysis

In this study, the multiple regressions are used for data Pearson Correlation Coefficient and Multivariate Regression
analysis. Initial data was inserted in Excel spreadsheet and were used to analyze data.
SPSS software was applied to analyze the data statistically. Ho= Data is normal
Also Rahavard Novin software, Tadbir Pardaz software, H1= Data is abnormal
stock organization library and stock sites such as www.rdis.ir
and www.irbourse.com were used. Table 2. One-sample Kolmogorov-Smirnov Test
DIV
Research Method and Regression Model N 360
Mean .94639
The correlation research method was used to determine the Normal parametersa.b
Std. Deviation 1.0424
relationship between financial leverage, business strategies, Absolute .074
firm‟s size and dividend pay-out with performance. Multiple Most Extreme
Positive .074
regressions were applied to test the relationship between Differences
Negative -.070
these variables.
Kolmogorov-Smirnov Z 1.212
We examine the relationship between these variables in a
panel multiple regression framework. Also we determine an Asymp. Sig. (2-tailed) .106
optimal model to predict the performance. We consider the a. Test distribution is normal.
empirical model described as follows: b. Calculated from data.

PERFORMit= β0 + β1i STRAi.t+ β2i LEVit+ β3i STRAit* Following the table (II), Sig = 0.106>0.05. Thus result show
LEVi,t+ β4i SIZEit+ β5i DIVit+ε that data is normal.

Sample Selection Firms that used from Cost leadership Strategy

Testing Results of the first group hypothesis:
The sample was chosen from the firms listed on the Tehran
stock exchange (TSE), for the period 2003 to 2010, using the Table 3. Variables Entered
following criteria: Model Variables Entered Method
1). Firms were listed in TSE during 2003-2010. Cost leadership Strategy
1 Step wise
2). Data was available for all years under study. (STRA)
3). The company didn‟t have change in the fiscal year for 2 LEV Step wise
study period. 3 STRA *LEV Step wise
4). Banks, Insurance and Investment firms didn‟t consider in 4 DIV Step wise
this study.
The data used in the analysis were collected from the annual
reports of the official bulletins of the Tehran stock exchange. A total optimum model was used to predict the performance
The final sample contains 45 firms. based on Cost leadership Strategy. We entered variables into

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the model respectively. 4 models were defined and finally optimum model to predict the performance. As a result, the
the last model (4) including 4 variables was defined as an regression model came as the followings:

PERFORMit= β0+ β1i STRAit+ β2i LEVit+ β3i STRAit*LEVit+ β4i DIVi,t + εit

Table 4. Excluded Variables

Model Variable Beta t Sig. Partial Coefficient VIF
1 Size 0.036 0.659 0.511 0.041 1.023
As it is seen, size significance level is equal to 0.511 > 0.05, therefore, this variable was not entering the model.

Presenting total optimum model based on model 4 (T-

test)
Optimum model was model 4, which had a more present a more precise prediction of the performance and in
determination coefficient than the previous ones. In fact, the first group hypothesis; the optimum model was model 4.
when most variables were beside each other, they could

Table 5. Coefficients of model 4

Unstandardized Standardized
Model4 Coefficients Coefficients t Sig VIF
B Stl. Erro Beta
Constant -0.058 0.132 -0.439 0.000
STRA 0.715 0.146 0.447 4.913 0.000 1.100
LEV 1.042 0.253 0.485 4.126 0.000 1.367
STRA*LEV -0.752 0.256 -0.439 -2.942 0.004 1.187
DIV 0.017 0.008 0.114 1.975 0.049 1.168

The optimal regression model was written as the following:

PERFORMit= -0.058+ 0.715 STRAit+ 1.042 LEVit -0.752 STRAit*LEVit+ 0.017 DIVit

As it is seen in optimum model, Cost leadership Strategy
entered with coefficient equal to 0.715. Thus, there is a
positive relationship between Cost leadership Strategy with
performance. Coefficients of LEV and DIV variables
interred to optimal model are positive, thus relations
between LEV and DIV with performance are positive. In
other hand Coefficient of STRA *LEV are negative, thus
there is a negative relationship between STRA *LEV with
performance. Meanwhile, based on the results of table (V),
VIF coefficient related to the variables entered to the final
model indicated that there isn‟t major change in coefficient
in relation with figure 1, and there aren‟t collinear between
independent variables in the final model.

Firms that used from Product differentiation strategy

Testing Results of the second group hypothesis:

Table 6. Variables Entered

Model Variables Entered Method
1 STRA *LEV Step Wise
2 Size Step Wise
3 Product differentiation strategy (STRA) Step Wise
4 LEV Step Wise
5 DIV Step Wise

A total optimum model was used to predict the performance and finally the last model (5) including all variables was
based on Product differentiation strategy. We entered defined as an optimum model to predict the performance.
variables into the model respectively. 5 models were defined

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Journal of Asian Business Strategy, Vol. 2(1), pp. 14-23

As a result, the regression model came as the followings:

PERFORMit= β0+ β1i STRAit*LEVit + β2i SIZEit+ β3i STRAit + β4i LEVi,t + β5i DIVi,t+ εit

Presenting total optimum model based on model 5 (T- when all variables were beside each other, they could present
test) a more precise prediction of the performance and in the
Optimum model was model 5, which had a more second group hypothesis; the optimum model was model 5.
determination coefficient than the previous ones. In fact,

Table 7. Coefficients of model 5

Unstandardized Standardized
Coefficients Coefficients
Model 4
Stl. t Sig VIF
B Beta
Erro
Constant -3.485 0.576 -6.046 0.000 1.4
STRA*LEV 41.028 3.163 0.913 12.971 0.000 1.031
size 0.752 0.099 0294 7.560 0.000 1.392
STRA -23.505 4.035 -0.355 -5.825 0.000 1.302
LEV 0.674 0.235 0.124 2.864 0.005 1.274
DIV -0.028 0.013 -0.096 -2.104 0.036 1.250

The optimal regression model was written as the following:

PERFORMit= -3.485+ 41.028 STRAit*LEVit + 0.752 SIZEit -23.505 STRAit+ 0.674 LEVit – 0.028 DIVit

As it is seen in optimum model, Product differentiation
strategy entered with coefficient equal to -23.505. Thus,
there is a negative relationship between Product
differentiation strategies and performance. Coefficients of
STRA *LEV, SIZE and LEV variables interred to optimal
model are positive, thus relations between STRA *LEV,
SIZE and LEV with performance are positive. On the other
hand Coefficient of DIV is negative, thus there is a negative
relationship between DIV with performance. Meanwhile,
based on the results of table (VII), VIF coefficient related to
the variables entered to the final model indicated that there
isn‟t any major changes in coefficient in relation with figure
1, and there isnt collinear between independent variables in
the final model.
Results of the First Group Hypothesis Test
Results of the first group hypotheses test (shows in
appendix),indicated that four variables with significant
relationship with firm performance, explained 25% of
behavior of the dependent variable.
As the relationship between the variables in the model
showed, if companies‟ strategy is based on cost leadership
strategy; cost leadership strategy, financial leverage and
dividend variables have a direct link relationship with
company's performance. Thus, if the company's strategy is
based on cost leadership strategy, with increase in financial
leverage and Dividend payments; the performance will be
increased. The financial leverage multiplication strategy
variable has inversely relationship with company's
performance. The overall results of the first group
hypotheses tests suggest that, financial leverage, business
strategy and dividends payout have positiveand significant
impact on company's performance. It should be noted that
outcome isn‟t the same as the results of Jermias (2008) that
examined "the relative influence of competitive intensity and
business strategy on the relationship between financial
leverage and performance". He showed that if the companies
use cost leadership strategy, the relationship between
financial leverage and performance will be negative. Bu the
results of this study are the same as the results of Barton and
Gordon (1988) and O‟Brien (2003). They found that cost
leadership strategies had an important influence on financial
leverage.
Results of the Second Group Hypothesis Test
Results of the second group hypotheses test (shows in
appendix),Indicated that all variables with significant
relationship with firm performance, explained 61% of
behavior of the dependent variable.

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 Journal of Asian Business Strategy, Vol. 2(1), pp. 14-23
As the relationship between the variables in the model
showed, if companies‟ strategy is based on product
differentiation strategy; the financial leverage, firm‟s size
and financial leverage multiplication strategy variables, will
have a direct link relationship with company's performance.
Thus, if the company's strategy is based on product
differentiation strategy, with increase in financial leverage,
firm‟s size and financial leverage multiplication strategy; the
performance will be increased. The financial leverage
multiplication strategy variable has inversely relationship
with company's performance. Also with increase in product
differentiation strategy and dividend payout; the
performance decreases.
The overall results of the second group hypotheses tests
suggest that, financial leverage and size of company have a
positive and significant impact on company's performance
while dividend payout and product differentiation strategy
have a negative and significant impact on company
performance. It should be noted that outcome isn‟t the same
as the results of Jermias (2008). He showed that if the
companies use product differentiation strategy, the
relationship between financial leverage and performance will
be negative. But the results of this study are the same as the
results of Barton and Gordon (1988) and O‟Brien (2003).
They found that product differentiation strategies had an
important influence on financial leverage.
Comparison of Two Group Hypothesis Results
Results of comparison of two groups hypotheses confirms:
the positive relationship exists between financial leverage
and performance; and if the companies chose Product
differentiation strategies rather than cost leadership strategy,
this relationship is more positive. If the company chose cost
leadership strategy; the company‟s performance increases.
While if the company chose product differentiation strategy;
the company‟s performance increases. It shows that the
Iranian companies tend to choose cost leadership strategy as
Business strategy. Such results aren‟t consistent with the
results of Jermias (2008). He showed that there was a
negative relationship between financial leverage and
performance. And if the companies chose Product
differentiation strategies rather than cost leadership strategy,
this relationship will be more negative.
In the first group of hypotheses (the cost leadership),
dividend pay-out has a positive significant relationship with
Performance but in the second group of hypotheses (product
differentiation) dividend pay-out has a negative significant
relationship with performance.
In the first group of hypotheses (the cost leadership), the
firm‟s size does not have a significant relationship with
firm‟s performance, but in the second group of hypotheses
(product differentiation), the firm‟s size has a positive
relationship with firm‟s Performance.
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APPENDIX

First group hypothesis:

Model Summary e

Adjusted Std. Error

Model R R Square Durbin- Watson
R Square the Estimate
a
1 .409 .167 .164 .9568820
2 .455b .207 .201 .9357160
3 .489c .239 .230 .9183434
4 .500d .250 .239 .9132998 1.993
a. Predictors: (Constant), STRA
b. Predictors: (Constant), STRA, LEV
c. Predictors: (Constant), STRA, LEV, STRA*LEV
d. Predictors: (Constant), STRA, LEV, STRA*LEV, DIV
e. Dependent Variable: PERFORM

ANOVA e
Sum of
Model df Mean square F Sig
Squares
Regression 48.568 1 48.568 53.043 .000a
1 Residual 241.725 354 .916
Total 290.292 355
Regression 60.019 2 30.009 34.274 .000b
2 Residual 230.273 353 .876
Total 290.292 355
Regression 69.333 3 23.111 27.404 .000c
3 Residual 220.959 352 .843
Total 290.292 355
Regression 72.588 4 18.147 21.756 .000d
4 Residual 217.704 351 .834
Total 290.292 355
a. Predictors: (Constant), STRA
b. Predictors: (Constant), STRA, LEV
c. Predictors: (Constant), STRA, LEV, STRA*LEV
d. Predictors: (Constant), STRA, LEV, STRA*LEV, DIV
e. Dependent Variable: PERFORM

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Excluded Variables e

Co linearity Statistics
Partial
Model Beta In t Sig Minimum
Correlation Tolerance VIF
Tolerance
LEV .240 a 3.616 .000 .218 .684 1.462 .684
a
SIZE .058 1.027 .306 .063 .999 1.001 .999
1 DIV .185 a 3.241 .001 .196 .936 1.069 .936
STRA*LEV .094 a 1.065 .288 .066 .403 2.480 .403
LEV
SIZE .065 b 1.177 .240 .073 .997 1.003 .682
b
2 DIV .144 2.496 .013 .152 .884 1.132 .646
STRA*LEV -.491 b -3.323 .001 -.201 .133 7.524 .133
LEV
SIZE .043 c .784 .434 .048 .981 1.019 .131
c
3 DIV .114 1.975 .049 .121 .856 1.168 .129
STRA*LEV
LEV
SIZE .036 d .659 .511 .041 .977 1.023 .127
4 DIV
STRA*LEV
a. Predictors: (Constant), STRA
b. Predictors: (Constant), STRA, LEV
c. Predictors: (Constant), STRA, LEV, STRA*LEV
d. Predictors: (Constant), STRA, LEV, STRA*LEV, DIV
e. Dependent Variable: PERFORM

Residual Statistics a
Minimum Maximum Mean Std. Deviation N
Predicted Value .178041 6.052359 .948084 .5211556 359
Residual -1.377527 4.467954 .000816 .9060194 359
Std. Predicted Value -1.476 9.748 -.004 .996 359
Std. Residual -1.508 4.892 .001 .992 359
a. Dependent Variable: PERFORM

Second group hypothesis:

Model Summary f
R Adjusted Std. Error Durbin
Model R
Square R Square the Estimate watson
1 .676a .458 .456 1.4757277
2 .731b .535 .531 1.3691829
3 .773c .597 .593 1.2761245
4 .780d .608 .602 1.2612381
5 .784e .615 .607 1.2531307 1.918
a. Predictors: (Constant), STRA*LEV
b. Predictors: (Constant), STRA*LEV, SIZE
c. Predictors: (Constant), STRA*LEV, SIZE, STRA
d. Predictors: (Constant), STRA*LEV, SIZE, STRA, LEV
e. Predictors: (Constant), STRA*LEV, SIZE, STRA, LEV, DIV
f. Dependent Variable: PERFORM

22
Journal of Asian Business Strategy, Vol. 2(1), pp. 14-23

ANOVA e
Sum of Mean
Model df F Sig
Squares square
Regression 490.563 1 490.563 225.259 .000a
1 Residual 581.465 357 2.178
Total 1072.028 358
Regression 573.368 2 286.684 152.926 .000b
2 Residual 498.660 356 1.875
Total 1072.028 358
Regression 640.477 3 213.492 131.098 .000c
3 Residual 431.551 355 1.628
Total 1072.028 358
Regression 652.078 4 163.019 102.481 .000d
4
Residual 419.951 354 1.591
Total 1072.028 358
Regression 659.030 5 131.806 83.935 .000e
5 Residual 412.028 353 1.570
Total 1072.028 358
a. Predictors: (Constant), STRA*LEV
b. Predictors: (Constant), STRA*LEV, SIZE
c. Predictors: (Constant), STRA*LEV, SIZE, STRA
d. Predictors: (Constant), STRA*LEV, SIZE, STRA, LEV
e. Predictors: (Constant), STRA*LEV, SIZE, STRA, LEV, DIV
f. Dependent Variable: PERFORM

Residual Statistics a
Std.
Minimum Maximum Mean N
Deviation
Predicted Value -.728565 19.608133 1.108380 1.5681408 359
Residual -2.127228 11.944304 .000 1.2413860 359
Std. Predicted
-1.171 11.797 .000 1.000 359
Value
Std. Residual -1.698 9.532 .000 .991 359

a. Dependent Variable: PERFORM

23